The new year brings tax season, but it’s not as simple as it seems. The Internal Revenue Service (IRS) has complex laws and regulations to follow.Knowing if you don’t owe federal taxes impacts your financial decisions throughout the year. While some taxes, such as sales tax, cannot be avoided, state and income taxes can.
IRS updates on taxes for 2025
The IRS increases marginal tax rates for payroll taxes annually to reflect inflation. This assures that persons receiving cost-of-living wage increases remain in the same tax category as their income has not significantly increased.
- 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).
- 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
- 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
- 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
- 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
- 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
- 37% for incomes over $626,350 ($751,600 for married couples filing jointly).
Standard deductions have grown, allowing taxpayers to pay lower taxes.The IRS reports that the standard deduction for single and married couples filing separately will increase to $15,000 in 2025, up $400 from 2024.
The standard deduction for married couples filing jointly now stands at $30,000, up $800 from 2024. The standard deduction for heads of households will be $22,500 in 2025, up $600 from 2024.
Furthermore, persons who have had their salaries withheld may submit returns to collect those sums as refunds, provided they meet the requirements.
Nonprofit organizations such as churches, hospitals, schools, and shelters, as well as most Americans residing overseas, are still exempt from taxes if they meet the Internal Revenue Code’s conditions.
Expats earning less than $130,000 a year and living permanently abroad are exempt from US taxes. This is to avoid double taxation on income for most families, as people living permanently overseas must also pay taxes in their new home nation.
The inheritance tax (also known as the Estate Tax Credit) will have a basic exclusion of $13,990,000, while the annual exclusion for gifts will increase to $19,000 per person.
Earned income tax credits for taxpayers with three or more qualified children will increase from $7,830 to $8,046, effective tax year 2024.
Significant deductions can reduce taxable income and lead to exemptions. High medical bills, mortgage interest, and charitable gifts are all legitimate deductions.
In 2025, Medical Savings Accounts for self-only coverage will have an annual deductible of $2,850 to $4,300, up $50 and $150 from the preceding year. The maximum out-of-pocket payment for self-only coverage will increase to $5,700 from $5,550 in 2024.
For family coverage, the yearly deductible must be between $5,700 and $8,550, an increase of $150 and $200 over 2024. The out-of-pocket spending maximum for family coverage will climb to $10,500 in 2025, up from $10,200 in the previous tax year.
Additional changes can be found on the IRS website. If you have any questions or concerns, it’s best to consult with a tax adviser who can review your information.
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